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Understanding establishment mode choice of foreign manufacturing firms in Ghana

Samuel Ato Dadzie (Ghana Institute of Management and Public Administration, Accra, Ghana)
Richard Afriyie Owusu (School of Business and Economics, Linnaeus University, Kalmar, Sweden)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 21 September 2015

847

Abstract

Purpose

The purpose of this paper is to analyse the foreign direct investment (FDI) strategies of manufacturing firms in Ghana using the eclectic model in order to understand how ownership, location and internalization factors impact FDI to developing countries like Ghana.

Design/methodology/approach

The authors use a quantitative methodology in order to statistically explore the relationships between dependent and independent variables. The data comes from a sample of 75 multinational enterprises that invested in the manufacturing sector between 1994 and 2008.

Findings

The results reveal that large firm size, extensive international experience and large market size lead to the choice of acquisition mode of entry, while high cultural distance, high country risk, high proprietary assets and incentives lead to the choice of greenfield mode in the context of Ghana.

Research limitations/implications

The results imply that the different economic, business and legal (locational) conditions of developing countries create different FDI strategies and paths of companies compared to developed markets.

Practical implications

Policy makers in developing countries should make efforts to improve market size, the institutional and regulatory environment, as well as the availability of human capital in order to attract FDI.

Originality/value

FDI studies have mainly analysed establishment mode strategies of firms in advanced markets. There is an increasing amount of research on FDI in emerging markets but very little on developing countries and African markets. Therefore, this study enables the authors to develop implications for existing theory and generate practical implications for firms and policy makers related to African and developing country markets.

Keywords

Citation

Dadzie, S.A. and Owusu, R.A. (2015), "Understanding establishment mode choice of foreign manufacturing firms in Ghana", International Journal of Emerging Markets, Vol. 10 No. 4, pp. 896-920. https://doi.org/10.1108/IJoEM-09-2012-0124

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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